Base Rate Scanner

What is a Base Rate?

A base rate is the historical frequency of an event across many similar situations. If the Fed has held rates in 74% of the meetings where unemployment was below 4%, that 74% is the base rate. It's not a guarantee — it's the starting point for your probability estimate before you factor in what's unique about today.

Markets often ignore base rates. Traders focus on the specific news of the day — the latest CPI print, the Fed chair's tone, what the bond market is pricing — and anchor too hard to recent events. This is the base rate fallacy: treating every situation as unique when the historical pattern is actually highly informative.

When the gap signals a trade

A 10pp gap between the base rate and the market price is significant. It means the market is either dramatically overpaying or underpaying for the event relative to its historical frequency. That's not a trade by itself — you still need a view on why this time is or isn't different. But it's a flag worth investigating, and the bigger the gap, the more you need a specific reason to disagree with history.

Data quality matters

Not all base rates are equally reliable. An incumbent re-election rate built from 22 observations is more trustworthy than a Bitcoin year-end price base rate built from 5 years of data. The scanner shows sample size and confidence level for every category so you know how much weight to give the signal.